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Garcia v. Golden Abacus Inc.

United States District Court, S.D. New York

June 13, 2017



          LAURA TAYLOR SWAIN United States District Judge.

         Adelfo Gavilan Garcia, Cesar Gayosso, Gabriel Tecun, Hageo Cardona, Luis Fernandez Escobar Flores, Miguel Angel Diaz Gonzalez, and Genaro Lopez Tem (collectively, “Plaintiffs”) bring this action against Golden Abacus Inc. (d/b/a BarKogi) (“BarKogi”), Danny P. Louie, Laura Wong, and Albert C. Yuen (collectively, “Defendants”), alleging violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et. seq. and the New York Labor Law (“NYLL”), Articles 6 and 19. The Court has subject matter jurisdiction of this action pursuant to 28 U.S.C. §§ 1331, 1367 and 29 U.S.C. § 201.

         The Defendants now move to compel arbitration of the instant dispute and request that the Court dismiss Plaintiff's complaint in its entirety. The Court has reviewed all submissions carefully and, for the reasons below, denies the Defendants' motion.


         Plaintiffs are former employees of BarKogi. (Compl. ¶ 2.) On or about their respective dates of hire, the Plaintiffs signed documents including an arbitration agreement (the “Agreement, ” Handbook at 33; see Pl. Mem. at 4; Def. Mem. at 2). The Agreement provided, in pertinent part, that the following types of disputes would be submitted to arbitration: “[c]laims of unlawful harassment or discrimination, ” “[c]laims of unfair demotion or reduction in pay, ” and “[a]ny claims of breach of contract or tort claims arising out of [an employee's] employment or termination with the Company, including, but not limited to, defamation, intentional infliction of emotional distress, intentional interference with contract, or right to privacy.” (Handbook at 33).

         On August 5, 2016, Plaintiffs brought the instant action alleging violations of Defendants' statutory obligations during the course of Plaintiffs' employment. In particular, Plaintiffs allege violations of the minimum wage and overtime provisions of the FLSA and NYLL and violations of the notice and recordkeeping, wage statement, and tip withholding provisions of the NYLL. (Compl. ¶¶ 192-209, 214-219, 223-226.) Plaintiffs further allege violations of the spread of hours wage order of the New York Commissioner of Labor and seek recovery of equipment costs under the FLSA and NYLL. (Compl. ¶¶ 210-213, 220-222.)

         On November 22, 2016, Defendants moved to compel arbitration of Plaintiffs' claims pursuant to the Agreement. Plaintiffs oppose Defendants' motion and argue that the Agreement is unenforceable on the grounds of unconscionability, and also that the instant dispute is outside the scope of the Agreement.


         The Federal Arbitration Act (“FAA”) provides that an arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C.S. § 2 (LexisNexis 2008). Enacted “[t]o overcome judicial resistance to arbitration, [the FAA] embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006).

         However, “[a]rbitration is essentially contractual . . ., and parties may not be forced into arbitration if that was not their true agreement.” WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir. 1997). In deciding whether to compel arbitration, a district court must determine: “(1) whether the parties entered into an agreement to arbitrate; (2) if so, the scope of that agreement; (3) if federal statutory claims are asserted, whether Congress intended those claims to be nonarbitrable; and (4) if some, but not all, claims are subject to arbitration, whether to stay the balance of the proceedings pending arbitration.” Begonja v. Vornado Realty Trust, 159 F.Supp.3d 402, 408-09 (S.D.N.Y. 2016) (citing Guyden v. Aetna, Inc., 544 F.3d 376, 382 (2d Cir. 2008). “The threshold question of whether the parties indeed agreed to arbitrate is determined by state contract law principles.” Nicosia v., Inc., 834 F.3d 220, 229 (2d Cir. 2016).

         “In deciding motions to compel, courts apply a standard similar to that applicable for a motion for summary judgment.” Id. (internal quotation marks omitted). That standard “requires a court to consider all relevant, admissible evidence submitted by the parties and contained in pleadings, depositions, answers to interrogatories, and admissions on file, together with . . . affidavits” and to “draw all reasonable inferences in favor of the non-moving party.” Id. (internal quotation marks omitted).

         Defendants argue the instant action is within the scope of the Agreement because Plaintiffs' claims may properly be characterized as sounding in tort, or, in the alternative, as contract claims or claims regarding an unfair reduction in pay. (See Def. Mem. at 7-8; Def. Mem. in Reply to Pls.' Opp. to Mot. to Compel Arbitration (“Def. Reply Mem.”), Docket Entry No. 36, at 6-8). Defendants have proffered no legal authority supporting their tort characterization argument. Courts in this circuit have routinely declined to apply tort principles to FLSA and NYLL claims. See Xochimitl v. Pita Grill of Hell's Kitchen, Inc., No. 14-CV-10234-JGK-JLC, 2016 WL 4704917, at *12 (S.D.N.Y. Sept. 8, 2016), report and recommendation adopted sub nom. Xochimitl v. Pita Grill of Hell's Kitchen, Inc, No. 14 CIV. 10234 (JGK), 2016 WL 6879258 (S.D.N.Y. Nov. 21, 2016) (declining to apply tort principles regarding the offset of damages to an FLSA or NYLL claim); Chen v. Yuen, No. 04-CV-06579-GBD-KNF, 2015 WL 7758532, at *4 n.11 (S.D.N.Y. Dec. 1, 2015) (same). Accordingly, the instant action cannot properly be characterized as asserting “tort claims” within the meaning of the arbitration provision.

         Defendants' characterization of the instant action as a claim for breach of contract is similarly unpersuasive. Plaintiffs assert violations of statutory obligations. “[A] plaintiff cannot recover under a contract theory for a defendant['s] failure to comply with existing statutes.” Krichman v. J.P. Morgan Chase & Co., No. 06-CV-15305, 2008 WL 5148769, at *3 (S.D.N.Y. Dec. 8, 2008). An FLSA or NYLL claim asserts breach of a duty that “is independent of any duty an employer might owe his employee pursuant to an express or implied employment contract; it arises by operation of law.” Byrne v. C.I.R., 883 F.2d 211, 215 (3d Cir. 1989). Accordingly, such claims are not “claims of breach of contract” that are within the scope of the Agreement.

         Finally, Plaintiffs' claims cannot be characterized as asserting a “reduction in pay.” (Id. at 33.) Defendants argue that, because Plaintiffs were provided with a Notice of Pay Rate stating a rate in compliance with the FLSA and NYLL, any payment below the statutory requirements would constitute a “reduction.” (Def. Reply Mem. at 7-8.) Plaintiffs' Sixth through Ninth Causes of Action have nothing to do with Plaintiffs' pay rate, but rather allege Defendants' failure to comply with notice and recordkeeping requirements, failure to provide required wage statements, failure to reimburse equipment costs, and misappropriation of tips. (See Compl. ¶¶ 214-226.) Plaintiffs' First through Fifth Causes of Action allege failure to comply with minimum wage and overtime laws. (See id. ΒΆΒΆ 192-213.) Plaintiffs do not allege that Defendants reduced Plaintiffs' pay, but ...

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